MGM Resorts International Reports Third Quarter Financial And Operating Results

LAS VEGAS, Oct. 30, 2018 /PRNewswire/ -- MGM Resorts International (NYSE: MGM) ("MGM Resorts" or the "Company") today reported financial results for the quarter ended September 30, 2018. On January 1, 2018, the Company adopted the new revenue recognition accounting standard (ASC 606). As such, certain previously reported 2017 numbers have been retrospectively adjusted under the new standard to assist with comparability to the prior period.

"Our third quarter operating performance exceeded our expectations despite the tough year on year comparison, resulting from robust casino business and an exceptionally strong event calendar last year." said Jim Murren, Chairman and CEO of MGM Resorts International. "During the quarter, we successfully opened MGM Springfield, which has been well received by our customers. Earlier this month, we also officially opened the NoMad Hotel at Park MGM, which will help expand our customer reach. We remain highly focused on our strategic priorities, including maximizing the performance of our portfolio of premier properties, driving growth in free cash flow and delivering on our capital allocation strategy."

Said Mr. Murren, "Stabilizing market conditions are positioning MGM Resorts for improvement in the fourth quarter. Looking further out, our growth will be driven by the continued ramp of our newly opened properties along with our disciplined approach to improve our margins throughout our resort portfolio. We also are executing on additional targeted growth opportunities in key areas including sports betting and Japan's upcoming Integrated Resort market. Our focus on balance sheet strength will help ensure prudent capital allocation and the continued return of capital to shareholders. Overall, we remain confident that we will deliver on our 2020 goals."

Third Quarter 2018 Financial Highlights:

• Diluted earnings per share of $0.26 in both the current and prior year quarters;
• Consolidated net revenues increased 7% compared to the prior year quarter to $3.0 billion;
• Net revenues decreased 2% compared to the prior year quarter at the Company's domestic resorts to $2.2 billion and decreased 3% on a same-store basis, excluding contributions from the opening of MGM Springfield on August 24, 2018;
• REVPAR⁽¹⁾ decreased 3.9% compared to the prior year quarter at the Company's Las Vegas Strip resorts;
• Operating income of $435 million at the Company's domestic resorts, compared to $545 million in the prior year quarter. The current quarter was impacted by $31 million of preopening expenses at MGM Springfield, continued disruption at Park MGM and a decrease in casino and non-casino revenues at the Company's Las Vegas Strip resorts;
• Net income attributable to MGM Resorts of $143 million, compared to $148 million in the prior year quarter;
• Domestic resorts Adjusted Property EBITDA⁽²⁾ of $627 million, a 12% decrease compared to $712 million in the prior year quarter and a 13% decrease on a same-store basis;
• Same-store operating margin of 21.2% in the current quarter at the Company's domestic resorts, a 283 basis point decrease compared to the prior year quarter;
• Same-store Adjusted Property EBITDA margin of 28.3% in the current quarter at the Company's domestic resorts, a 313 basis point decrease compared to the prior year quarter;
• MGM China operating income of $52 million compared to $38 million in the prior year quarter and Adjusted Property EBITDA of $130 million, a 7% increase compared to the prior year quarter as a result of the opening of MGM Cotai;
• CityCenter operating income from resort operations of $28 million and Adjusted EBITDA from resort operations of $85 million, a 20% decrease in Adjusted EBITDA from resort operations compared to the prior year quarter;
• Distributed $64 million to shareholders via the Company's quarterly dividend of $0.12 per share; and
• Repurchased $176 million of the Company's common stock in the third quarter.

Certain Items Affecting Third Quarter Results

The following table lists certain other items that affect the comparability of the current and prior year quarterly results (approximate EPS impact shown, net of tax, per share; negative amounts represent charges to income):

Domestic Resorts

Casino revenue for the third quarter of 2018 increased 1% compared to the prior year quarter, due primarily to the opening of MGM Springfield. Casino revenues decreased 3% on a same-store basis compared to the prior year quarter.  Table games win decreased 15% at the Company's Las Vegas Strip resorts.

The following table shows key gaming statistics for the Company's Las Vegas Strip resorts:

The following table shows key gaming statistics for the Company's other domestic resorts:

Domestic resorts rooms revenue and same-store domestic resorts rooms revenue decreased 5% compared to the prior year quarter due primarily to a 3.9% decrease in REVPAR at the Company's Las Vegas Strip resorts.

The following table shows key hotel statistics for the Company's Las Vegas Strip resorts:

Operating income at the Company's domestic resorts was $435 million for the third quarter of 2018 and was impacted by $31 million in preopening expenses at MGM Springfield, disruption related to the repositioning and rebranding at Park MGM and a decrease in casino and non-casino revenues at the Company's Las Vegas Strip resorts, as discussed above. Operating income in the prior year quarter was $545 million. Domestic Resorts Adjusted Property EBITDA decreased 12% to $627 million in the third quarter of 2018 and decreased 13% on a same-store basis.

Mr. Murren concluded, "We expect to deliver positive results in the fourth quarter at our Las Vegas Strip resorts with net revenues up slightly and Las Vegas Strip REVPAR up one to two percent. We also expect Las Vegas Strip Adjusted Property EBITDA margins to be flat to up slightly. These projected results are in line with our previously stated full year guidance. Heading into 2019, the completion of Park MGM and NoMad, the expanded MGM Grand convention space, and a better backdrop in group business position us well in Las Vegas. We will also benefit from a full year of operations at MGM Springfield."

Corporate Expense

Corporate expense, including share-based compensation for corporate employees was $98 million in the third quarter of 2018, an increase of $10 million compared to the prior year quarter, due primarily to an increase in transaction costs related to the Empire City acquisition, the formation of the MGM GVC Interactive LLC joint venture, and MGM Growth Properties LLC's ("MGP") Hard Rock Rocksino Northfield Park acquisition.

MGM China

Key third quarter results for MGM China include:

• Net revenues of $606 million, a 37% increase compared to the prior year quarter. The current quarter benefited from the opening of MGM Cotai in February 2018, which contributed $172 million of net revenues;
• Main floor table games win increased 43% compared to the prior year quarter due primarily to the opening of MGM Cotai;
• VIP table games win increased 11% compared to the prior year quarter due primarily to an 8% increase in VIP table games win at MGM Macau;
• Operating income was $52 million in the current quarter compared to $38 million in the prior year quarter;
• Adjusted Property EBITDA increased 7% to $130 million compared to $121 million in the prior year quarter. The current quarter included $11 million of license fee expense compared to $8 million in the prior year quarter; and
• Operating margin was 8.6% in the current year quarter, and Adjusted Property EBITDA margin was 21.5% in the current quarter compared to 27.4% in the prior year quarter, due primarily to the ramp-up of operations at MGM Cotai.

The following table shows key gaming statistics for MGM China:

MGM China paid an interim dividend of $31 million in September 2018, of which $17 million was received by MGM Resorts.

Unconsolidated Affiliates

The following table summarizes information related to the Company's share of income from unconsolidated affiliates:

On August 30, 2018, CityCenter Holdings, LLC ("CityCenter") closed the sale of the Mandarin Oriental Las Vegas and adjacent retail parcels for $214 million in cash. CityCenter recorded a loss on sale of $133 million, the majority of which was recognized during the first quarter. MGM Resorts recorded a $12 million gain during the current quarter, related to the reversal of basis differences in excess of its share of the loss recorded by CityCenter. CityCenter used the proceeds from the sale, together with cash from operations, to pay a $225 million dividend in September 2018, of which MGM Resorts received its 50% share, or $112.5 million.

Key third quarter results for CityCenter include the following (see schedules accompanying this release for further detail on CityCenter's third quarter results):

• Net revenues were $294 million, a 6% decrease compared to the prior year quarter, due to a decrease in casino and rooms revenues;
• Aria's table games win decreased 20%, due to a 10% decrease in table games drop and a decrease in table games hold percentage to 20.9% in the current quarter compared to 23.5% in the prior year quarter;
• Aria's slots win increased slightly compared to the prior year quarter due primarily to a 5% increase in volume offset by a decrease in the slots hold percentage;
• REVPAR at Aria decreased 2% compared to the prior year quarter to $228;
• REVPAR at Vdara decreased 5% compared to the prior year quarter to $184;
• Operating income from resort operations was $28 million compared to operating income of $53 million in the prior year quarter; and
• Adjusted EBITDA from resort operations was $85 million, a 20% decrease compared to the prior year quarter.

MGM Growth Properties

During the third quarter of 2018, the Company made rent payments to MGM Growth Properties Operating Partnership LP ("MGP Operating Partnership") in the amount of $193 million and received distributions of $84 million from the MGP Operating Partnership. On September 17, 2018, the Board of Directors of MGP approved a quarterly dividend of $0.4375 per Class A share (based on a $1.75 dividend on an annualized basis) totaling $31 million, which represents an increase of $0.07 per share year to date, for a total increase of 4.2% year to date, which was paid on October 15, 2018 to holders of record on September 28, 2018. The Company concurrently received an $85 million distribution attributable to its ownership of MGP Operating Partnership units.

On July 6, 2018, MGP completed the previously announced acquisition of the Hard Rock Rocksino Northfield Park for approximately $1.1 billion.

In the current quarter, the Company recorded within Management and other operations $66 million in net revenues and $22 million in Adjusted Property EBITDA related to MGP's Northfield casino.

On September 18, 2018, the Company entered into an agreement with MGP to acquire all of the operating assets of Hard Rock Rocksino Northfield Park from MGP for approximately $275 million, subject to purchase price adjustments for certain working capital changes. The real estate assets will be leased to the Company pursuant to an amendment to the existing master lease between subsidiaries of the Company and MGP, increasing the annual rent payment to MGP by $60 million, prorated for the remainder of the lease year. Consistent with the master lease terms, 90 percent of this rent will be fixed and contractually grow at 2 percent per year until 2022. The transaction is expected to close in the first half of 2019, subject to regulatory approvals and other customary closing conditions.

MGM Resorts Dividend and Share Repurchases

On October 30, 2018, the Company's Board of Directors approved a quarterly dividend of $0.12 per share totaling approximately $63 million. The dividend will be payable on December 14, 2018 to holders of record on December 10, 2018.

In May 2018, MGM Resorts completed its $1.0 billion share repurchase program and announced a new $2.0 billion share repurchase program. During the current quarter, MGM Resorts repurchased approximately 6 million shares of its common stock at an average price of $28.87 per share for an aggregate amount of $176 million. Approximately $1.5 billion remains available under the $2.0 billion share repurchase program. All shares repurchased under the Company's program have been retired.

Financial Position

The Company's cash balance at September 30, 2018 was $1.3 billion, which included $663 million at MGM China and $50 million at the MGP Operating Partnership. At September 30, 2018, the Company had $14.8 billion of principal amount of indebtedness outstanding, including $228 million outstanding under its $1.5 billion senior secured credit facility, $2.8 billion outstanding under the $3.6 billion MGP Operating Partnership senior secured credit facility and $2.5 billion outstanding under the $2.9 billion MGM China credit facility.

"We are generating strong free cash flow, and as we reach the end of our development cycle, we remain poised to achieve our consolidated net leverage target of 3 to 4 times by 2020 while returning capital to shareholders." said Dan D'Arrigo, Executive Vice President and Chief Financial Officer of MGM Resorts.

Conference Call Details

MGM Resorts will host a conference call at 5:00 p.m. Eastern Time today which will include a brief discussion of these results followed by a question and answer period. The call will be accessible via the Internet through http://investors.mgmresorts.com/investors/events-and-presentations/ or by calling 1-888-317-6003 for domestic callers and 1-412-317-6061 for international callers. The conference call access code is 2681205. A replay of the call will be available through Tuesday, November 6, 2018. The replay may be accessed by dialing 1-877-344-7529 or 1-412-317-0088. The replay access code is 10124888. The call will be archived at http://investors.mgmresorts.com. In addition, MGM Resorts will post supplemental slides today on its website at http://investors.mgmresorts.com for reference during the earnings call.

1    REVPAR is hotel revenue per available room.

2    "Adjusted EBITDA" is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, NV Energy exit expense and property transactions, net. "Adjusted Property EBITDA" is Adjusted EBITDA before corporate expense and stock compensation expense, which are not allocated to each property. "Same-store Adjusted Property EBITDA" is Adjusted Property EBITDA related to operating resorts which were consolidated by the Company for both the entire current and prior year periods presented. "Adjusted Property EBITDA margin" is Adjusted Property EBITDA divided by net revenues. "Same-store Adjusted Property EBITDA margin" is Same-store Adjusted Property EBITDA divided by same-store net revenues. Adjusted EBITDA information is presented solely as a supplemental disclosure to reported GAAP measures because management believes these measures are 1) widely used measures of operating performance in the gaming industry, and 2) a principal basis for valuation of gaming companies. Management presents Adjusted Property EBITDA on a "same-store" basis as supplemental information because management believes that providing performance measures on a "same-store" basis is useful for evaluating the period-to-period performance of the Company's domestic casino resorts.

Management believes that while items excluded from Adjusted EBITDA, Adjusted Property EBITDA, Same-store Adjusted Property EBITDA, Adjusted Property EBITDA margin, and Same-store Adjusted Property EBITDA margin may be recurring in nature and should not be disregarded in evaluation of the Company's earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods because these items can vary significantly depending on specific underlying transactions or events that may not be comparable between the periods being presented. Also, management believes excluded items may not relate specifically to current operating trends or be indicative of future results. For example, preopening and start-up expenses will be significantly different in periods when the Company is developing and constructing a major expansion project and will depend on where the current period lies within the development cycle, as well as the size and scope of the project(s). Property transactions, net includes normal recurring disposals, gains and losses on sales of assets related to specific assets within the Company's resorts, but also includes gains or losses on sales of an entire operating resort or a group of resorts and impairment charges on entire asset groups or investments in unconsolidated affiliates, which may not be comparable period over period. In addition, capital allocation, tax planning, financing and stock compensation awards are all managed at the corporate level. Therefore, management uses Adjusted Property EBITDA and Same-store Adjusted Property EBITDA as the primary measure of the Company's operating resorts' performance.

Adjusted EBITDA, Adjusted Property EBITDA, Same-store Adjusted Property EBITDA, Adjusted Property EBITDA margin, and Same-store Adjusted Property EBITDA margin should not be construed as alternatives to operating income or net income, as indicators of our performance; or as alternatives to cash flows from operating activities, as measures of liquidity; or as any other measure determined in accordance with generally accepted accounting principles. We have significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in Adjusted EBITDA, Adjusted Property EBITDA, Same-store Adjusted Property EBITDA, Adjusted Property EBITDA margin, or Same-store Adjusted Property EBITDA margin. Also, other companies in the gaming and hospitality industries that report Adjusted EBITDA, Adjusted Property EBITDA, Same-store Adjusted Property EBITDA, Adjusted Property EBITDA margin, or Same-store Adjusted Property EBITDA margin information may calculate Adjusted EBITDA, Adjusted Property EBITDA, Same-store Adjusted Property EBITDA, Adjusted Property EBITDA margin, or Same-store Adjusted Property EBITDA margin in a different manner.

Reconciliations of GAAP net income (loss) to Adjusted EBITDA and GAAP operating income (loss) to Adjusted Property EBITDA and Same-store Adjusted Property EBITDA are included in the financial schedules in this release.

The Company does not provide reconciliations of Adjusted EBITDA, Adjusted Property EBITDA, Same-store Adjusted Property EBITDA, Adjusted Property EBITDA margin, or Same-store Adjusted Property EBITDA margin to net income on a forward-looking basis because the Company is unable to forecast the amount or significance of certain items required to develop meaningful comparable GAAP financial measures without unreasonable efforts. These items include gains or losses on sale or consolidation transactions, accelerated depreciation, impairment charges, gains or losses on retirement of debt and variations in effective tax rate, which are difficult to predict and estimate and are primarily dependent on future events, but which are excluded from the Company's calculations of Adjusted EBITDA, Adjusted Property EBITDA, Same-store Adjusted Property EBITDA, Adjusted Property EBITDA margin, and Same-store Adjusted Property EBITDA margin.

About MGM Resorts International

MGM Resorts International (NYSE: MGM) is an S&P 500® global entertainment company with national and international locations featuring best-in-class hotels and casinos, state-of-the-art meetings and conference spaces, incredible live and theatrical entertainment experiences, and an extensive array of restaurant, nightlife and retail offerings. MGM Resorts creates immersive, iconic experiences through its suite of Las Vegas-inspired brands. The MGM Resorts portfolio encompasses 28 unique hotel offerings including some of the most recognizable resort brands in the industry. Expanding throughout the U.S. and around the world, the company in 2018 opened MGM Springfield in Massachusetts, MGM COTAI in Macau, and the first Bellagio-branded hotel in Shanghai. The 81,000 global employees of MGM Resorts are proud of their company for being recognized as one of FORTUNE® Magazine's World's Most Admired Companies®. For more information visit us at www.mgmresorts.com.

Statements in this release that are not historical facts are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and/or uncertainties, including those described in the Company's public filings with the Securities and Exchange Commission. The Company has based forward-looking statements on management's current expectations and assumptions and not on historical facts. Examples of these statements include, but are not limited to, the Company's expectations regarding future results and the Company's financial outlook (including REVPAR and other guidance), the Company's ability to generate future cash flow growth, return value to shareholders and further de-lever, the Company's ability to execute its strategic plan and capital allocations strategy, and deliver on its 2020 goals. These forward-looking statements involve a number of risks and uncertainties. Among the important factors that could cause actual results to differ materially from those indicated in such forward-looking statements include effects of economic conditions and market conditions in the markets in which the Company operates and competition with other destination travel locations throughout the United States and the world, the design, timing and costs of expansion projects, risks relating to international operations, permits, licenses, financings, approvals and other contingencies in connection with growth in new or existing jurisdictions and additional risks and uncertainties described in the Company's Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports). In providing forward-looking statements, the Company is not undertaking any duty or obligation to update these statements publicly as a result of new information, future events or otherwise, except as required by law. If the Company updates one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those other forward-looking statements.